Here are the latest developments in global markets:
- FOREX: Although British average earnings (excluding bonuses) in January appeared stronger than expected, reaching the highest growth in a year, pound/dollar eased to a one-week low of 1.3913 (-0.51%) as the unemployment rate rose surprisingly for the first time since June 2015 in the three months to December. In Brexit news, more than 60 Conservative members wrote a letter to the UK Prime Minister, Theresa May, demanding a clean exit from the EU a day after the Brexit Minister, David Davis, said that the UK wants to avoid any obstacles to smooth trade with the EU, echoing the division over Brexit issues in May’s government and party. The Eurozone’s flash Markit PMI readings for the month of February disappointed, weighing on euro/dollar which already faced pressure from the rising dollar. Euro/dollar changed hands lower at 1.2319 (-0.13%) and euro/pound was up at 0.8845 (+0.33%). Dollar/yen reversed part of earlier gains made on the back of higher US Treasury yields, last trading at 107.44 (+0.12%), while the dollar index inched up to 89.87 (+0.12%). Aussie/dollar and kiwi/dollar stood at 0.7855 (-0.33%) and 0.7343 (-0.03%) respectively.
- STOCKS: Rising bond yields gave a knock to the European stocks on Wednesday, with the pan-European STOXX 600 losing 0.46% and the blue-chip Euro STOXX 50 moving lower by 0.42% at 1000 GMT despite encouraging earnings releases by telecommunication companies, and the Lloyds Bank. The German DAX 30 retreated by 0.46% with all sectors being in the red, the French CAC 40 weakened by 0.26%, the Italian FTSE MIB fell by 0.87% and the Spanish IBEX 35 dropped by 0.96%. US stock futures were pointing to a negative open.
- COMMODITIES: A strengthening dollar continued to weigh on oil prices during early European trading hours, while worries that US oil production could hamper OPEC’s efforts to curb supply also hanged in the background. WTI crude and Brent were down by 1.0% at $61.12/barrel and $64.59/barrel respectively at 1020 GMT. In other commodities, the dollar-denominated gold was trading at one-week lows, last seen at $1328.88/ounce.
Day ahead: Bank of England to discuss inflation before British Parliament; US FOMC minutes eyed
After the wage growth figures, the next challenge for the pound today would be the Bank of England’s inflation hearing before the British parliament where the BOE Governor, Mark Carney, and a number of Monetary Policy Committee members will discuss the latest inflation readings, giving further guidance on the central bank’s monetary policy path. Note that growth in consumer prices stood flat at 3.0% y/y in January, unlike analysts’ expectations of a soft decline towards 2.9%.
In politics, a meeting taking place today that could touch on Brexit issues is the one between UK PM Theresa May and Dutch PM Mark Ruttee.
In the US, investors will be waiting for the release of the FOMC minutes regarding the Fed’s last meeting held at the end of January where Fed policymakers decided to hold interest rates unchanged. Particularly market watchers will be interested to identify any details on the Fed’s future monetary policy strategy as markets are currently betting that the central bank will likely deliver another rate hike at its next meeting on March 20-21.
In terms of data, the economic calendar will feature US figures in the remaining of the day. At 1445 GMT February’s Markit flash PMI estimates will be available, while a few minutes later at 1500 GMT the National Association of Realtors will publish stats on existing home sales. Moreover, before the day ends, the American Petroleum Institute will report on the US crude oil stocks for the week ending February 16 at 2130 GMT, bringing some volatility to oil prices.
Turning to public appearances in the US, the Philadelphia Fed President Patrick Harker – a non-voting FOMC member in 2018 – is scheduled to speak on the US economic outlook at 1400 GMT.
Traders will be also paying attention to this week’s US government debt auctions.
Earnings releases will continue to attract attention in the stock markets.